Employment Contract Template: Hire Right from Day One

You found the perfect candidate. The interviews went great, salary expectations match, and they can start next Monday. So you shake hands, say "welcome to the team," and figure you'll sort out the paperwork later. What could go wrong?

A lot, actually. Without a written employment contract template, you're building a working relationship on assumptions. The employee thinks they get 30 vacation days. You planned for 20. They assume a three-month notice period. You expected two weeks. These misunderstandings don't surface on day one. They surface when someone wants to leave, when a bonus isn't paid, or when a dispute lands on a lawyer's desk. A clear, signed employment contract prevents all of that.

What Should an Employment Contract Include?

Every employment contract needs to cover the basics. In the EU, the Transparent and Predictable Working Conditions Directive actually requires employers to provide written terms within seven days of the start date. In Germany, the Nachweisgesetz (Proof of Employment Act) makes this mandatory since August 2022, with fines up to EUR 2,000 for non-compliance.

Here are the 10 clauses every employment contract should include:

1. Names and addresses of both employer and employee
2. Job title and description of duties
3. Start date (and end date, if fixed-term)
4. Workplace location (including remote work arrangements)
5. Compensation -- salary, bonuses, payment frequency
6. Working hours -- weekly hours, overtime rules, flexible time
7. Vacation and leave -- paid days off, sick leave policy
8. Probation period -- duration, notice period during probation
9. Termination and notice periods -- how either party can end the contract
10. Confidentiality and non-compete clauses -- protecting business interests

Miss any of these and you're asking for trouble down the road. Each one deserves a clear, specific section in your contract. No vague language, no "we'll figure it out later."

Types of Employment Contracts

Not every hire looks the same. Before drafting your contract, you need to pick the right type. Here's a quick comparison:

Important: Misclassifying an employee as a freelancer is one of the most expensive mistakes a business can make. Tax authorities in Germany and across the EU actively audit this. If someone works fixed hours, uses your equipment, and reports to a manager, they're an employee -- regardless of what the contract says. Check our guide on freelancer contracts to understand the differences.

Employment Contract Template: Key Sections Explained

Let's walk through the sections that matter most.

Job Title and Responsibilities

Be specific. "Marketing Manager" tells you almost nothing. "Marketing Manager responsible for managing the company's social media channels, email campaigns, and a team of two junior marketers" tells you exactly what the role involves. This section protects both sides. The employee knows what's expected. The employer can reference it during performance reviews.

Include a flexibility clause like: "The employer may assign additional duties consistent with the employee's qualifications and position." This gives you room to adjust responsibilities without rewriting the entire contract.

Compensation and Benefits

Spell out everything:

• Base salary (gross annual or monthly amount)
• Payment date (e.g., the last business day of each month)
• Bonus structure (if applicable, with clear conditions)
• Benefits (health insurance contributions, pension, meal vouchers, gym membership)
• Expense reimbursement (travel, equipment, home office allowance)

In Germany, the minimum wage is EUR 12.82/hour as of January 2025. Your contract must meet or exceed this. For salaried employees, calculate the effective hourly rate to make sure you're compliant.

Working Hours

State the weekly hours clearly. In Germany, the Arbeitszeitgesetz limits regular working time to 8 hours per day (extendable to 10 hours with compensation). Your employment contract template should include:

• Standard weekly hours (e.g., 40 hours per week)
• Core hours (if applicable, e.g., 10:00-15:00)
• Overtime rules (compensated with pay or time off?)
• Remote work days (if offered)

Don't leave overtime vague. "Overtime is included in the salary" clauses are frequently challenged in German labor courts. Be explicit about how overtime is tracked and compensated.

Probation Period

Most employment contracts in Germany include a probation period of up to six months. During this time:

• The notice period is two weeks (instead of the standard four weeks)
• Either party can end the relationship quickly
• Performance expectations should be clearly communicated

After probation, the standard statutory notice period applies. For employees with longer tenure, notice periods increase: four weeks after two years, two months after five years, and up to seven months after 20 years.

Termination and Notice Period

This is where most disputes happen. Your contract should clearly state:

• Notice periods for both employer and employee
• Grounds for immediate termination (theft, fraud, gross misconduct)
• Severance (not mandatory in Germany, but common in negotiated exits)
• Garden leave (can you ask the employee to stay home during notice?)
• Return of company property (laptop, keys, access cards)

Under German law, dismissals must be socially justified after six months of employment (Kuendigungsschutzgesetz). This means you need a valid reason: personal conduct, performance issues, or business necessity. The contract can't override this, but it should reference the applicable rules.

Non-Compete and NDA Clauses

Non-compete clauses restrict where an employee can work after leaving. In Germany, they're only enforceable if:

• The restriction period is maximum 2 years
• The employer pays compensation of at least 50% of the last salary during the restriction
• The clause is in writing and signed

Without that compensation commitment, your non-compete clause is worthless. Many employers include them without realizing they'll need to pay for enforcement.

NDAs are simpler. A basic confidentiality clause that survives the end of employment is standard and usually enforceable without additional compensation.

Intellectual Property

Who owns the work an employee creates? In most EU countries, the default rule is that the employer owns work product created within the scope of employment. But it's smart to state this explicitly, especially for:

• Software code
• Designs and creative work
• Inventions (Germany's Arbeitnehmererfindungsgesetz gives employees specific rights to inventions)
• Content and publications

A clear IP clause prevents fights later, particularly if an employee leaves to start a competing business.

Common Mistakes in Employment Contracts

Using a generic template without adapting it. A US employment contract template won't work in Germany. At-will employment (where either party can end the relationship at any time without cause) is a US concept. It doesn't exist in the EU. Your template must match local labor law.

Forgetting to update old contracts. Labor laws change. Germany's Nachweisgesetz reform in 2022 added several new mandatory disclosures. If your employment contract template is from 2019, it's probably missing required information.

Vague job descriptions. "The employee will perform tasks as assigned" is not a job description. It's an invitation for disagreements about what the role actually involves.

Ignoring data protection. Under GDPR, you need to inform employees about how you process their personal data. Many contracts now include a separate data protection notice or reference the company's privacy policy. Don't skip this.

Making it difficult to sign. Printing, signing, scanning, mailing -- this process adds days or weeks before the employee officially starts. Use an electronic signature tool instead. Send a link, the new hire signs on their phone, and you have a legally binding contract in minutes.

Sign Your Employment Contract Online with CanUSign

Here's how to get your employment contract signed in under five minutes:

Step 1: Download the employment contract template or upload your own.

Step 2: Fill in the employee-specific details: name, role, salary, start date, working hours.

Step 3: Upload the finished contract to CanUSign, mark the signature fields for both employer and employee, and add date fields.

Step 4: Send it. The new hire receives a link via email, reviews the contract, and signs electronically. No account needed, no app to download. Works on any device.

Step 5: Both parties get a signed PDF with a full signature certificate and timestamps. Done.

At EUR 1 per signed document, it's the cheapest part of your entire hiring process. And it's legally binding under the EU eIDAS Regulation, the US ESIGN Act, and equivalent laws worldwide.

FAQ

What should an employment contract include?

At minimum: names of both parties, job title and duties, start date, workplace, salary, working hours, vacation days, probation period, notice periods, and any applicable collective bargaining agreements. In the EU, the Transparent Working Conditions Directive requires employers to provide these terms in writing within the first week.

Is a verbal employment contract valid?

Technically, yes. In most countries, a verbal agreement to work in exchange for pay creates a binding employment relationship. But proving the specific terms of a verbal agreement is nearly impossible. In Germany, the Nachweisgesetz requires employers to document the essential terms in writing. Not having a written contract doesn't void the employment, but it does expose the employer to fines and makes disputes much harder to resolve.

What is an at-will employment contract?

At-will employment means either the employer or employee can end the relationship at any time, for any legal reason, with no notice. This is the default in most US states. It does not exist in the EU, UK, Canada, Australia, or most other countries, where employees have statutory protection against unfair dismissal. If you're hiring in Europe, don't use a US-style at-will contract. It won't hold up.

Can I use an electronic signature for employment contracts?

Yes. Electronic signatures are legally valid for employment contracts in the EU (under eIDAS), the US (under ESIGN Act), the UK, Canada, Australia, and most other jurisdictions. The only exception is in some countries where specific contract types require a qualified electronic signature or wet ink (e.g., fixed-term contracts in Germany technically require written form under BGB Section 623 for termination notices). For the initial employment agreement, a standard electronic signature works.

How long should a probation period be?

In Germany, the standard probation period is six months. Some companies use three months for junior roles. During probation, the notice period is typically two weeks for both sides. The probation period must be explicitly stated in the contract -- it doesn't apply automatically. After probation ends, the standard statutory notice periods kick in.

Start Hiring with Confidence

A good employment contract template saves you from the conversations nobody wants to have. The ones about miscommunicated vacation days, unclear bonus conditions, or who owns the code your developer wrote last quarter.

Grab the employment contract template, fill in the details, and get it signed online through CanUSign before your new hire's first day. It takes five minutes, costs EUR 1, and protects both you and your employee from day one.